VERTICALIZATION OF

FASHION BUSINESS
Research project
WS 2010
VERTICALIZATION OF FASHION
BUSINESS
 Project Supervisor
 Prof. Claus Bühs

 Project Team
 Arzu Uslu
 Asif Mangat
 Mehroon Gull
 Sajid Mehmood
 Sohail Raza
 Umer Jabbar
 Usman Ameer
VERTICALIZATION OF FASHION
BUSINESS
 Table of Contents
 Introduction
 Definition, Structure and Types
 Reasons for Verticalization

 Major Trends
 Verticalization of Fashion Business
 Verticalization Trends in National and International
Business
 SWOT Analysis for Vertical Integration
 Best Practices for Verticalization
 Conclusion
VERTICALIZATION OF FASHION
BUSINESS
 Definition

 Structure
 Contractualvertical system
 Corporate vertical system

 Types
 Backward vertical integration
 Forward vertical integration
VERTICALIZATION OF FASHION
BUSINESS
 Reasons for Verticalization
 Lower transaction costs
 Assure supply of outputs
 Correct market failure
 Increase monopoly profits
 Eliminate market power
VERTICALIZATION OF FASHION
BUSINESS
 Major Trends
 Joint venture
 Franchise

 Concession business
 Manufacturer‘s owns retail shops
 Retailer‘s owns manufacturing
 Traders with manufacturing & retailing
VERTICALIZATION OF FASHION
BUSINESS
 Verticalization trends in National and
Internation Trade
 Retail business to service provider
 Business specification
 Customer consistency multiple channels
 Diverse marketing techniques
 Brand strategy
VERTICALIZATION OF FASHION
BUSINESS
VERTICALIZATION OF FASHION
BUSINESS
Backward
Vertical
Integration

High Fashionable
Skirt

Forward
Vertical
Integration
 VERTICALIZATION OF FASHION
BUSINESS
 Different Types of Vertical Relationship
High

Long-term
contracts
Franchises
Joint
Formalization

ventures
Agency
agreement
Spot s
sales/
purchases

Informal Vertical
supplier/ Supplier/ integration
customer customer
relationships partnership
Low

Low Degree of Commitment

High
VERTICALIZATION OF FASHION
BUSINESS
 Strengths
 Transportation costs
 SC coordination
 Control over inputs
 Profit margins
 Access to distribution channels
 Facilitate investment
 Opportunities
 Economies of scale
 Managerial Rewards
 Shareholder Value
 Control of Markets
 Risk Bearing
 Weaknesses
 Capacity balancing issues
 Potentially higher costs
 Decreased flexibility
 New core competencies
 Threats
 Production cost fluctuation
 Vertically adjacent activities
 Monopolization of markets
 Competition
VERTICALIZATION OF FASHION
BUSINESS
 Backward Vertically Integrated Companies
 ZARA

 H&M

 Forward Vertically Integrated Companies

 Hugo Boss

 Esprit